A staggering number of people spent the bulk of 2020 working from home, which is significant because it is incredibly likely that we see businesses embrace remote work moving forward. The reality is that remote work was inevitable, COVID just sped the process up. Given the time of year, it’s only natural that people wonder whether any of these changes qualify them for deductions (business or personal).
The primary deduction most Americans are concerned with is known as the “home office deduction.” It makes sense, as most people who work from home are out of pocket for a bevy of items including toner, internet, and other equipment-related expenses. This article will briefly discuss the home office tax deduction.
As an initial matter, the name of the deduction is misleading: not everyone who works from home can deduct expenses for a “home office.” The threshold determination for the tax deduction is whether you are self-employed (e.g., independent contractor, business owner, etc.,).
To be clear, a W-2 employee can never claim a home office deduction because they will not satisfy the threshold requirement. However, most W-2 employees have a “side hustle;” if your side hustle meets the threshold requirement, you can make deductions based on that. Even if you meet this threshold requirement, your space still needs to qualify as a “home office.”
To qualify an office as a “home office,” for purposes of the home office tax deduction, your office needs to be used exclusively for business purposes. If you have an office that you work from, and that office has a couch that turns into a bed when guests stay over, you don’t have a “home office.” Of course, the rules don’t require that an entire room be an office; you can claim tax deductions based on the square footage that is actually used exclusively for business purposes (e.g., your desk, printer, etc., provided you don’t use them for non-business purposes).
In order to take the home office deduction, you will need to measure the square footage of the areas used exclusively for business; take the square footage and multiply that by $5. Keep in mind that the maximum deduction is $1,500 (or 300 ft2 ).
While a $1,500 deduction doesn’t seem like much, it can be invested with a great return on investment (“ROI”) back into your home.
At the Chernov Team we understand that knowledge is power, and knowledge of how to properly claim deductions for your work from home is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.